Good governance is central to equitable socioeconomic progress and political legitimacy. From administrative and judicial reforms, sustained economic growth to social inclusion, India faces a host of governance challenges. India’s ability to rethink governance will determine how good the country’s demographic dividend would be, reports Team Inclusion
The United Nations Development Programme (UNDP) offers a broad definition for good governance. It means “among other things, participatory, transparent and accountable. It is also effective and equitable. And it promotes the rule of law,” says the UN agency. “Good governance ensures that political, social and economic priorities are based on broad consensus in society and that the voices of the poorest and the most vulnerable are heard in decision-making over the allocation of development resources.”
Good governance runs on four wheels: a representative, accountable government; a political system that derives legitimacy from participatory democracy; durable and solid institutions; and, equitable socioeconomic growth. In its essence, it’s the quality of governance that separates success from failure in socioeconomic development and political evolution of a nation. Across countries, application of the set of policies in roughly similar contexts has yielded vastly different results. These variations have a bearing on governance.
Different countries face different governance challenges. India is compared with China. However, strictly going by the standards set by UNDP, China could not be a model for good governance. As tightly controlled by one party, it neither has participatory, transparent and accountable government nor are its socioeconomic priorities based on broad societal consensus. The justice system is subservient to the party. Yet, there is consensus in top leadership in China that the key governance challenges that question the party’s monopoly on power are massive corruption, uncoordinated, unstable and unsustainable economic model, and environmental degradation.
“There must be judicial reforms. There must be administrative reforms from the grassroots. On the economic front, the most important task before us is to stop the government expenditure from bloating. Expenditure management and emphasis on quality expenditure should be the theme and for this we will have to work in a very determined way.”
Corruption and sustainable economic development are key problems in India, too. But, as a vibrant democracy, India had a distinct advantage as it has an accountable government that is subject to transparent surveillance on multiple fronts, democratically elected legislatures, an independent judiciary and evolving regulatory watchdogs. That’s India’s inherent strength.
In the last 25 years, two main features of governance reforms in India were economic liberalisation and an emphasis on participatory democracy and inclusive growth. The basic principle of liberalisation was creating competitive markets with minimal barriers to entry and exit. Thanks to it, the country’s integration with the world has been seamless. Globalisation — as measured by the movement of ideas, people, goods, services and capital across borders — has brought immense opportunities and tough challenges in its wake. Yet, economic reforms and globalisation have not necessarily minimised the role of the state. Rather, it has only redefined it, expanding its role in some areas of economic activity and curtailing in others. In social development, the government’s role has not diminished.
In a move aimed at improving governance, the Union government constituted the second Administrative Reforms Commission (ARC) in 2005. It had presented 15 reports to government within four years. The reports covered the entire gamut of issues relating to public administration in keeping with the changed dynamics of governance and grapple with serious issues like organisational structure of the government, citizen-centric administration, decentralisation, internal security and public order, promoting e-governance and crisis management. The government has set up many groups of ministers (GoMs) to consider the ARC reports, review the pace of implementation of the recommendations they contained and provide implementation guidance to ministries/departments. However, the implementation has been at a glacial pace even though the ARC submitted its last report in 2009.
The ARC reports contain an excellent starting point for rethinking governance, even though most of them are gathering dust than any serious effort being made to make them a reality. The debate on rethinking governance has gained wider currency with the advent of the information and communication technology revolution sparked by the Internet and social media. The systems and processes of governance have been very slow in forward movement to reform in every aspect. That’s the immediate reaction of a common man who lately visited a government office to get some work done or has a litigation pending in our court system. Widespread corruption and the policy paralysis — which has been the hallmark of coalition governance — have added urgency to the debate.
“In terms of the type of people who are being elected, some very important changes in the electoral system need to be brought about. If the country shifts to a semi-proportional system of elections, the influence of money, muscle, caste and various other unhealthy things that go into the choice of candidates can be minimised.”
So, when Yashwant Sinha, who was a top bureaucrat before he entered politics and went on to become Finance Minister twice in the Chandra Shekhar and Atal Behari Vajpayee governments, says it’s time to think about ambitious reforms, the point must find wider resonance. “There must be judicial reforms. We can’t allow millions and millions of cases to remain pending with the judiciary. There should be time limits for a judge to decide cases. There must be administrative reforms from the grassroots. Sometimes, I feel that I am not a Member of Parliament; rather, I am the chief grievance officer of my constituency because the people have nowhere else to go. They come to me with their legitimate grievances because the administration at the lowest levels will not give them a hearing. They are not even accessible,” he says.
At its simplest form, good governance starts from the top and percolates downwards. In other words, it depends on the quality of our leaders, opines Naresh Gujral
Improving governance is an age-old question. You have a treatise on good governance in Chanakya’s Arthshathra, as even in those times it was a relevant question. If you had a good and honest king, the governance is excellent. Honesty and integrity flow from the top to the bottom. At its simplest form, good governance starts with the quality top leaders and then percolates downwards.
The kind of corruption we witness in public life has produced cynicism among the people. It has adversely affected the body politic of our country. Every leader is considered a leader of stature only if he has a private airplane or helicopter at his or her disposal. Dirty money is funding such paraphernalia.
The clean-up of our political system must start from the top. If top leaders, say five or 10 of them, say they don’t want dirty money for themselves or their parties, then it could set a stellar precedent for others to follow. The pressure from civil society has increased in recent times to improve governance and minimise corruption, and this is a welcome trend. Our leaders choose to ignore the popular aspirations at their own peril.
But our country is fortunate in one sense. All our prime ministers have been intellectually honest and morally upright. Good governance cannot materialise when power and responsibility are divorced where the person who is responsible has no power and those who wield real power have no responsibility.
“Good governance depends on the quality of our leaders. The kind of corruption we witness in public life now has produced cynicism among the people. The source of the dirty money is the mafia and the leaders are beholden to the it.”
In governance, small states have made tremendous progress. This is because governance can be easier and the improvements can be much more visible. Punjab may not really be known for its Panchayati Raj Institutions (PRIs), but the level of rural development the state has achieved is noteworthy.
I am all for direct benefit transfer of subsides. That is a workable proposition. However, my only worry is whether the authorities have foolproof mechanism ready to implement it.
Sitaram Yechury, the CPI(M) leader, goes one step further and calls for “radical shifts” in the way India’s democracy functions. It is not so much rethinking governance, but rather fine-tuning our procedures and institutions that matters more, he says. The most important element of governance in a democratic set-up is electioneering, and it is here that India should rethink first, he says. “In terms of the type of people who are being elected, some very important changes in the electoral system need to be brought about. Otherwise you see what is happening in the name of democracy is that opinion of the people often gets distorted by factors other than political.”
Yechury proposes shifting to a semi-proportional electoral system. “This system is in place in many democracies where people vote for a political party and then the party submits a list to the election commission. Depending on the percentage of votes that it gets, candidates are elected. Given India’s complexity and diversity, a complete proportional representation system may not really suit us. What will suit us would be a mixture of both,” he opines.
The debate on rethinking governance has gained wider currency with the advent of information and communication technology revolution sparked by the Internet and social media. The systems and processes of governance have been made very slow in forward movement to reform in every aspect
Naresh Gujral, Rajya Sabha member from Punjab, echoes similar concerns about our electoral process. “Elections have been commodified. When dirty money funds election campaign across parties, how can the country ensure participatory democracy?” he asks.
“Good governance depends on the quality of our leaders. The kind of corruption we witness in public life now has produced cynicism among the people,” he adds.
Former Union Minister of Panchyati Raj Mani Shankar Aiyar’s take on governance challenge is based on a separate angle. He says, ensuring the desired outcomes of government’s social sector and anti-poverty outlays constitute a serious challenge facing the country in socio-economic development. “Since 1991, no other country has allocated so much money for social sector welfare and anti-poverty programmes in such a short period of time as India. However, the fundamental governance challenge we face today is that while the outlays have increased, the outcomes virtually remain the same as what we obtained in 1991. There have been improvements on human development value, but they are negligible in comparison with the amount of money spent on anti-poverty or social welfare programmes. There is a complete mismatch between outlays and outcomes,” he notes.
“The DBT empowers the people. In a market economy, empowerment is equal to the money in your pocket. Let’s not forget the Amartya Sen’s research findings on Bengal famine. The famine occurred not because there wasn’t enough foodgrain; it occurred because the people did not have the money to buy it.”
Aiyar has a valid point on decentralisation. Progress on decentralisation and participatory democracy as proposed through 73rd and 74th Amendments to the Constitution for Panchayati Raj and urban local bodies, respectively, had been in fits and starts. One of the two key ingredients of strengthening local bodies is the devolution of functions, funds and functionaries (3Fs) related to matters listed in the Eleventh Schedule of the Constitution. The other is the enablement of their function of preparing and implementing bottom-up participatory plans for economic development and social justice. The devolution of 3Fs had been unsatisfactory, increasing the immensity of capacity constraints faced by local bodies.
“In 1992, after the economic reforms process was launched, governance reforms through Panchayati Raj were also enacted by Parliament. The plan was to yoke economic reforms and institutional reforms together so that the chariot of progress could run on two wheels. Sadly, what has happened in the last two decades is that while the wheel of economic reforms has progressed very fast, the wheel of governance reforms has either been punctured or allowed to be fall apart from the chariot altogether. In my view, this is primarily because institutional reforms — in other words, the empowerment of the Gram Panchayats and their urban counterparts — was simply not given the same attention as economic reforms,” Aiyar says.
According to him, the structuring of the centrally-sponsored schemes through parallel bodies meant the central government is principally responsible for not allowing proper devolution to take place.
Wajahat Habibullah, Chairman, National Commission for Minorities, agrees. He notes that the true measure of governance is gauged by the extent of people’s participation. “The Constitution talks of each Panchayat as a unit of self-governance. But is the Panchayati Raj system functioning simply as a conduit of huge amounts of money being distributed for poverty alleviation programmes? Have we made legitimate use of Panchayats in providing to the people a measure of participation in governance?” he asks.
Yechury also bemoans the dysfunctional state of Panchayati Raj system. “The system can be effective only when developmental funds are routed through Panchayats and they are empowered to decide on spending priorities. But other than the Left-ruled states, the system has not really flourished. Grassroots democracy assumes a certain degree of literacy, awareness, consciousness and in-built checks and balances. When the Left Front ruled West Bengal, about 52 per cent to 54 per cent of all developmental funds were given to Panchayats. Ditto for Kerala. We had planning boards that sought people’s participation in fund disbursement. That sort of involvement of the people is necessary,” he says.
Sinha stresses a bottom-up approach for development planning. “The people in the villages know what they want. All that the government has to do is to make sure that the Gram Sabhas are able to make a development plan after democratic consultations,” he adds.
Rakesh Singh, Chief Secretary to the Punjab government, argues that problem in India is that we have practised decentralisation in a narrow manner. “The basic problem is the trust deficit. The Centre doesn’t believe in states. The states, in their turn, do not believe in local bodies. There is a punishment culture and in this culture, trust doesn’t thrive. Our planning is top-down: from the Centre to states and the states to local bodies,” he says.
Sudhir Krishna, Union Urban Development Secretary, knows it better, as his ministry has been implementing the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) with the help of urban local bodies. “Participatory planning is intertwined with participatory governance. We have put a condition that before attempting empowerment, all local bodies should be elected in the first place. Good governance will come only through strengthened municipalities,” he agrees. Speaking on the JNNURM, he says it has changed the picture and people’s mindset.
“I have recently come across a study of China which actually argues that what we are seeing by way of this explosive growth of GDP in that country is essentially based on the growth of small enterprises, which grew staying below the radar of regulatory authorities. This is what I call capitalism by accident. The planners never intended this. They just opened up the public sector a little.”
Agriculture has been the most crucial sector that remained outside economic liberalisation. The controls the sector is subjected to hurt fair competition and productivity. It also keeps farmers poor and vulnerable to exploitation. Even as much remains to be done to improve the productivity of agriculture through scientific research and improved dissemination of knowledge, there are areas like marketing where reforms are badly needed. India must move towards a more liberalised trade policy with respect to agricultural products, may be with the exception of foodgrains, with no quantitative restrictions, and with minimal duties on exports and imports.
Besides improving storage facilities there is a need to redesign the mechanics of procurement and release of foodgrains to the market to ensure that the impact on prices is in the desired direction. Coupled with this there needs to be a strong initiative for improving marketing conditions and encouraging private sector participation by reforming the APMC Acts. “Appropriate changes in these legislations can boost private sector involvement and investment in the development of regulated markets, backup logistics, efficient warehouse receipt systems, futures markets and the infrastructure for imports and exports. This is particularly relevant for the high value agriculture segment which is currently hostage to high post-harvest losses and weak farm-firm linkages,” says Y S P Thorat, former Chairman of Nabard.
“We need to have fiscal consolidation as part of our effort to sustain high growth. In doing that, containing subsidies plays an important part. Subsidies as a proportion to GDP until 2005-06 were only 1.3 per cent. Even in 2007-08, it was only 1.4 per cent. But in 2008-09, it became 2.3 percent and in 2012-13, 2.6 per cent. Now the plan is to take it down to 2 per cent of the GDP in the next fiscal and further down to 1.6 per cent.”
Yechury criticises the lack of attention given to the sector. “What is happening at the moment is that the fundamental issues of the people, like agriculture and social infrastructure, are being ignored and the authorities are only looking at the superficial expressions of it like what is the flow of FDI into the country. This is based on a very faulty understanding that greater the FDI flow into India, the higher will be the economic growth, like a rising tide. But that doesn’t happen because the purchasing power in the hands of the people is on the decrease. The irony in India is that the subsidies you give to the rich are incentives for growth, but subsidies for the poor are a burden on the economy,” he adds.
Sinha says generation of more jobs in the manufacturing sector will certainly minimise the urban-rural gap in wealth generation. “It is very important. Investment must increase in manufacturing,” he points out, noting that the contribution of agriculture to the GDP is 13-14 per cent, but the percentage of people dependent on it for livelihood is 52-55 per cent.
“This is a very frightening imbalance developing in our economy. So what we need is a lot of ancillary activity in the rural areas. The Chinese have the concept of pool industry in each district. Think in terms of a pool industry in every district. There are models in Thailand and Brazil. So let’s implement the global best practices as far as creation of employment in the rural areas is concerned. Otherwise there will be pressure on our cities,” he cautions.
Many of the provisions in the existing laws are archaic and could be changed without compromising genuine labour interests. We need to make our labour markets more flexible while strengthening the social safety nets. This will facilitate greater investment in labour-intensive manufacturing. Rigidity in labour laws is one reason why India has not succeeded in setting up robust labour-intensive export sectors.
“DBT is an important strategic intervention that the government has undertaken to streamline benefit delivery. The DBT generates an auditable and transparent electronic trail on benefit delivery. Basically we have a platform which allows the government to transfer money to millions of people because the whole system is highly scalable, traceable and accountable.”
“The organised labour and trade unions militate against unorganised labour. That is why we need to organise unorganised labour and provide them with the social security as best as we can,” Sinha opines.
Economist Nitin Desai favours incentivising small & medium enterprises to reduce the urban-rural wealth gap and increase employment generation and productivity. “I have recently come across a study of China which actually argues that what we are seeing by way of this explosive growth of GDP in that country is essentially based on the growth of small enterprises, which grew staying below the radar of regulatory authorities, quite often with the connivance of local politicos who have to disguise them as cooperative enterprises. This is what I call capitalism by accident. The planners never intended this. They just opened up the public sector a little. But, in fact, what happened was completely different and now, the proportion of the Chinese economy which is outside the public sector is enormous,” he notes.
The government is saddled with ballooning current account and fiscal deficits. The government aims to restrict fiscal deficit to 5.3 per cent of GDP in 2012-13 and reduce it further to 3 per cent by 2016-17. Fiscal consolidation requires action on multiple fronts: improved revenue collection, reduction of subsidies, stepped-up disinvestment and accelerated economic reforms. Most importantly, efforts must be made to realise the revenue budgeted under tax receipts, on the one hand, and to contain and economise both Plan and non-Plan expenditure, mainly subsidies, on the other. India must adopt investor-friendly policies and diversify the exports basket to help contain the current account deficit.
“We need to have fiscal consolidation as part of our efforts to sustain high growth. In doing so, containing subsidies plays an important part. Subsidies as a proportion to GDP until 2005-06 were only 1.3 per cent. Even in 2007-08, it was only 1.4 per cent. But in 2008-09, it became 2.3 per cent and in 2012-13, 2.6 per cent. Now the plan is to take it down to 2 per cent of the GDP in the next fiscal and further down to 1.6 per cent,” notes C Rangarajan, Chairman of the PM’s Economic Advisory Council.
“On subsidies, the question people very often ask is, what about food security? My answer to that is, basically we should look at the total quantum of subsidy. And if in the perception of the government, food subsidies or food securities are paramount, we can completely provide for it but simultaneously we should be able to reduce other subsidies. The total quantum of subsidies can be done on the basis of prioritisation by the political system. The direct cash transfer system is one of the most efficient ways of making available the subsidies. It ensures the subsidies reach the right kind of people at the right time,” he adds.
“The Cabinet Committee on Investments must fast-track clearances, especially on large projects. There is also a deep felt-need for coordination among key ministries. In the medium and long term, issues relating to land acquisition and labour laws need to be addressed if you want the manufacturing sector to pick up.”
Sinha spells out his priorities. “In the economy I think the most important task before us is to stop the government expenditure from bloating. Expenditure management and emphasis on quality expenditure should be the theme and for this we will have to work in a very determined way. We have to take a conscious view with regard to subsidies and the proper targeting of subsidies. This is where the direct benefit transfer (DBT) scheme becomes important. But the government must not do it through the Aadhaar card; it must do it through the National Population Register.” He further adds, “We have to take determined steps to bring down food inflation. Moderate food inflation will have a benign impact on all other kinds of inflation. Then once you have created the space for the RBI to reduce interest rates, the investment climate will improve dramatically. Then automatically, the current account deficit (CAD) is t
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Inclusion is the first magazine dedicated to exploring issues at the intersection of development agendas and digital, financial and social inclusion. The magazine makes complex policy analyses accessible for a diverse audience of policymakers, administrators, civil society and academicians. Grassroots-focused, outcome-oriented analysis is the cornerstone of the work done at Inclusion.